Medicaid Program

Grants to States for Medicaid: FY14 $312,796,936,000; FY15 $337,853,662,000; est.

Medicaid is a government health insurance program that pays for the health care of specified categories low income families and persons. The Medicaid program is jointly funded by the Federal Government and States. Each year the Federal Government’s part of the Medicaid funding is provided through the Medical Assistance Program grants.

The objective of the Medical Assistance Program (Medicaid or Title XIX of the Social Security Act, as amended, (42 USC 1396 et seq.)) is to assure payments for medical assistance and services to low-income persons who are age 65 or over, blind, disabled, members of families with dependent children, low income pregnant women and children.

The U.S. Department of Health and Human Services (HHS) Centers for Medicare and Medicaid Services (CMS) administers the Medicaid program in cooperation with State governments. The Medicaid program is jointly financed by the Federal and State governments and administered by the States. Medicaid operates as a vendor payment program, with States paying providers of medical services directly. In particular, the federal grants along with contribution from the States pay for Medicare premiums, co-payments and deductibles of qualified Medicare beneficiaries meeting certain income requirements. More limited financial assistance is available for certain Medicare beneficiaries with higher incomes.

Each State has the right to make decisions about Medicaid eligible groups, types and range of services, payment levels for services, and administrative and operating procedures. Participating health care providers must accept the Medicaid reimbursement rates of as payment for health assistance and medical services. States receive transfers of allocated for Medicaid federal grants quarterly. The Federal share of Medicaid services may range from 50 percent to 83 percent. The main statistical factors used for this type of formula grants allocation are:

Medical assistance expenditures by State; and

Last 3-year average per capita income for the State.

All States must ensure they can fund their share (depending on the State the share varies from 27% to 50%) of Medicaid expenditures for the care and services available under their state plan. Sources of funding for the state share of Medicaid payments include permissible taxes and donations, state government appropriations and transfers.

The States are allowed to establish their own Medicaid provider payment rates within federal requirements. In accordance with the federal rules States can use the federal grants and state funding allocated for Medicaid to pay for services in 2 ways, through

1) fee-for-service or 2) managed care arrangements.

Under the Medicare fee-for-service arrangements, States pay providers directly for the services. In general the payment rates are based on 3 factors:

Costs of the service

What commercial payers pay in the private market

What Medicare pays for equivalent services

Under managed care arrangements, States contract with organizations offering private health care plans and pay them fixed monthly premiums for each Medicaid enrollee. Private health insurance plans offer through their networks of providers the health care benefits to enrolled Medicaid recipients as per each Medicaid managed care arrangement. According to CMS, approximately 70% of Medicaid enrollees nationwide are served through managed care delivery systems, where providers are paid a fixed monthly payment rate.

Payment rates are often updated based on specific trending factors, such as the Medicare Economic Index or a Medicaid-specific trend factor that uses a state-determined inflation adjustment rate. The methodologies for service rates are described in the Medicaid state plan.

The Medicaid benefits package is broad and all statutory categories of services are listed in Section 1905(a) of the Social Security Act (the Act) for which Federal Medicaid matching grants are available. Some of these categories are mandatory, which means that if a State chooses to participate in the Medicaid program and get federal grants – it is required to provide all mandatory services as described in the Act. Medicaid benefits categories that are listed as optional are left to States to decide if they will provide them. Here is a list of the mandatory and optional Medicaid benefits categories.

For the categorically needy, States must provide in and out-patient hospital services; rural health clinic services; federally-qualified health center services; other laboratory and x-ray services; nursing facility services, home health services for persons over age 21; family planning services; physicians’ services; early and periodic screening, diagnosis, and treatment for individuals under age 21; pediatric or family nurse practitioner services; and services furnished by a nurse-midwife as licensed by the States. For the medically needy, States are required to provide a minimum mix of services for which Federal financial participation is available (see section 1902(a)(10)(C)(iv) of the Social Security Act).

Beneficiary Eligibility:

Medicaid is a means-tested health and medical services program for certain individuals and families with low incomes and few resources. The federal grants and States funding provide for payments of medical services on behalf of cash assistance recipients, children, pregnant women, and the aged who meet income and other eligibility requirements. Since the Medicaid program is administered by the States, each State establishes its own eligibility standards and determines the type, amount, duration, and scope of the health services.

Low-income persons who are over age 65, blind or disabled, members of families with dependent children, low- income children and pregnant women, certain Medicare beneficiaries and, in many States, medically-needy individuals may apply to a State or local welfare agency for medical assistance. Eligibility is determined by the State in accordance with Federal regulations.

Medicaid offers a comprehensive scope of benefits with limited cost-sharing – all this designed to meet the basic health needs and limited financial resources of the eligible beneficiaries. In addition to the medical services covered by most private insurance, Medicaid covers an array of supportive and enabling services for high-need populations – such as transportation, durable medical equipment, case management, and habilitation services – that private insurance generally does not cover today and is unlikely to cover under health care reform. Medicaid entitles children to a comprehensive set of services through the Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) benefit. The inclusion of enabling services in Medicaid strengthens access for low-income individuals with chronic conditions and disabilities, who fare at least as well in Medicaid as in private insurance.

To qualify for Medicaid, you must meet specific eligibility requirements that vary by state:
You must be considered categorically needy due to blindness, disability, and/or age or you must be financially needy. This means that your income and your assets must fall under a certain limit set by the state in which you live. Low-income is only one test for Medicaid eligibility. There are other established thresholds that vary state by state that must also be met.

Each state sets its own Medicaid eligibility guidelines. The program is geared towards people with low incomes, but eligibility also depends on meeting other requirements based on age, pregnancy status, disability status, other assets, and citizenship.

States must provide Medicaid services for individuals who fall under certain categories of need in order for the state to receive federal matching funds. For example, it is required to provide coverage to certain individuals who receive federally assisted income-maintenance payments and similar groups who do not receive cash payments. Other groups that the federal government considers “categorically needy” and who must be eligible for Medicaid include:

Individuals who meet the requirements for the Aid to Families with Dependent Children (AFDC) program that were in effect in their state on July 16, 1996

Children under age 6 whose family income is at or below 133% of the Federal poverty level (FPL)

Pregnant women with family income below 133% of the FPL

Supplemental Security Income (SSI) recipients

Recipients of adoption or foster care assistance under Title IV of the Social Security Act

Special protected groups such as individuals who lose cash assistance due to earnings from work or from increased Social Security benefits

Children born after September 30, 1983 who are under age 19 and in families with incomes at or below the FPL

Certain Medicare beneficiaries

States may also choose to provide Medicaid coverage to other similar groups that share some characteristics with the ones stated above but are more broadly defined. These include:

Infants up to age 1 and pregnant women whose family income is not more than a state-determined percentage of the FPL

Certain low-income and low-resource children under the age of 21

Low-income institutionalized individuals

Certain aged, blind, or disabled adults with incomes below the FPL

Certain working-and-disabled persons with family income less than 250 percent of the FPL

Some individuals infected with tuberculosis

Certain uninsured or low-income women who are screened for breast or cervical cancer

Certain “medically needy” persons, which allow States to extend Medicaid eligibility to persons who would be eligible for Medicaid under one of the mandatory or optional groups, except that their income and/or resources are above the eligibility level set by their State.

Starting 2014, the Affordable Care Act (ACA) extends Medicaid eligibility to all individuals at or below 138 % of the federal poverty line. This ACA provision will allow low-income childless adults, including those receiving General Assistance from their State, to qualify for Medicaid. Check Medicaid eligibility requirements in your State.